Norwegian Gov't Pension Fund exits Elbit Systems

The fund sold its holding because of Elbit Systems' role in Israel's security fence.

Israel may now be facing a diplomatic crisis with Norway in the wake of the crisis with Sweden. The Norwegian Government Pension Fund, which has $400 billion in assets under management, has sold its $5.4 million holding in Israeli defense contractor Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) because the company supplies systems for the separation fence.

Elbit Systems, controlled by chairman David Federmann, declined to comment.

Norway's Minister of Finance Kristin Halvorsen said, "We do not wish to fund companies that so directly contribute to violations of international humanitarian law."

Halvorsen said the separation wall had unacceptably restricted the movements of Palestinians on the West Bank, so that an investment in any company involved in the project caused "unacceptable risk of contribution to particularly serious violations of fundamental ethical norms." She added, "The International Court has already ruled that the separation barrier is a violation of human rights."

Halvorsen said the shares were sold secretly ahead of the announcement.

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The Norwegian Ministry of Finance said that the surveillance system supplied by Elbit Systems to the Israeli authorities was one of the main components of the separation barrier. "The surveillance system has been specially designed in close collaboration with the buyer and has no other applications," the ministry said. "Elbit Systems is clearly aware of exactly where and how the system is intended to be used." These elements were instrumental in the decision to exclude Elbit Systems.

The Norwegian Government Pension Fund is managed by Norges Bank unit Norges Bank Investment Management (NBIM). Ethical considerations play a role in investment decisions, and in the past it has sold holdings in companies that violated human rights or which were involved in the development of nuclear weapons.

The fund's ethics committee said that Elbit Systems refused for months to respond to questions sent to the company to clarify its position about its involvement in the supply of equipment for the separation fence.

The Ministry of Foreign Affairs has responded furiously to the decision, and Israel is expected to denounce it. Minister of Foreign Affairs Avigdor Lieberman is currently visiting Ethiopia, and efforts are being made to obtain his response. The ministry is angry that Norway's Foreign Ministry rushed to publish the announcement even before notifying Israel's Ministry of Foreign Affairs about the decision through official diplomatic channels.